China property sales slump as tech sector profit growth slows

• China’s economy has fallen into crisis, which continues to affect the real estate market and stock market.
• Home sales at one of the largest developers fell 57% year-over-year in August.
• Meanwhile, profit growth in the technology sector was the slowest since 2022.

Neither the real estate market nor the Chinese stock market are helping the country emerge from the economic crisis.

As a leading real estate developer grapples with liquidation, stock market investors have a new reason to be disappointed.

A sharp decline in home sales in China is hurting Country Garden, one of the country’s leading real estate developers.

Contracted sales in August fell 57% from a year earlier, according to Bloomberg, deepening problems after a 72% drop in July.

The country’s real estate sector has been struggling for years as falling demand and little government stimulus have overburdened debt-ridden property firms. Sales of new homes among the 100 largest developers fell 26.8% in August, Bloomberg reported.

The improved sales would be welcome news for Country Garden as the company battles fears of liquidation. The outlet reported that the company is now considering a new restructuring of its yuan-denominated bonds as it struggles to fund delayed debt payments.

Bloomberg reported that because the company invests in smaller cities, Country Garden’s slump has been particularly severe compared to its competitors: its sales decline in the first seven months of this year was more than twice the average among major developers.

JPMorgan’s chief China economist, Haibin Zhu, told CNBC that home prices won’t stabilize until 2025, if not later. “The housing crisis is not over yet,” he said.

The Chinese stock market also showed no respite.

Separately, Bloomberg reported that the latest earnings per share for the MSCI China index fell 4.5% from a year earlier, the worst performance in five quarters. Meanwhile, a 19% EPS gain among eight leading Chinese technology companies marked the slowest quarter since 2022.

Technology sector revenues have fallen sharply amid a drop in consumption in the sector, and analysts said the recovery would require more support from Beijing.

In one telling example, the gloomy consumer outlook sent Temu’s parent company, PDD Holdings, down 29% last week. Baidu and Kuaishou Technology also fell amid warning signals from Chinese consumers.

Outside of technology, real estate and consumer discretionary were the main laggards in the latest earnings season, Bloomberg reported. The consensus EPS growth for MSCI China has now fallen to 11%.